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  3. suppose that the demand and supply functions for good x...

Question: suppose that the demand and supply functions for good x...

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  1. Suppose that the demand and supply functions for good X are

Qd = 56 – 2PX + 0.01M +7PR

Qs = -600 + 10PX

Where PX is the sales price of good X, M is average consumer income, PR is the price of a related good.

  1. Is good X a normal or inferior good?
  2. Are good X and R complements of substitutes? Explain?

    Suppose M = $50,000 and PR = $20
  3. What is the direct demand function for good X?
  4. What is the equilibrium price and quantity?
  5. What is the market outcome if M rises to $60,000, other things being equal?
  6. What is the market outcome if price is of good PR is decreases to $14 other things being equal (M= $50,000?
  7. What happens to equilibrium price and quantity if the supply function becomes QS = - 360 + 10PX, for the original demand function and the original values for M and PR?
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